Perpetual challenges FMA raids

Perpetual Trust has taken the Financial Markets Authority to court over searches of companies associated with Pyne Gould Corporation, as part of an investigation into related-party loans.

Tuesday, August 28th 2012, 6:00AM 2 Comments

by Niko Kloeten

The FMA revealed last month that it was investigating Perpetual, a subsidiary of PGC, over a $28 million loan facility to the Torchlight Fund, which is run by PGC boss George Kerr.

Perpetual has taken a judicial review proceeding against the FMA, which it claims over-stepped its powers when it executed a search of PGC-related companies in April.

In a case that began yesterday in the High Court at Auckland, Perpetual is seeking to have Justice Paul Heath declare the raids were unlawful.

It has taken issue with both the form of the notice issued under Section 25 under the FMA Act and the amount of time the companies involved were given to comply.

Since the FMA announced its investigation in July the loan, which was from Perpetual's Cash Management Fund, has been fully repaid.

However, the publicity around the loan, made after an emailed request by Kerr, resulted in a rush to the exits by investors that resulted in Perpetual's Mortgage Fund being frozen.

More recently Perpetual announced it will close down its Mortgage Fund and ‘internalise' its Cash Fund.

PGC has also announced it is looking to sell Perpetual and will invest more money in Torchlight, which will be the main part of the business.

The High Court case is due to continue today.

Niko Kloeten can be contacted at niko@goodreturns.co.nz

« Loan will be repaid: SPI

Fund managers call for level playing field »

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Comments from our readers

On 28 August 2012 at 8:49 am Mark said:

Perpetual you don't have the right to remove large amounts of investor funds
and lend to your mates! i.e. a Brother finance co, because its got a case of the shorts! Could look like asset Stripping! Thanks FMA carry on your good work!

On 28 August 2012 at 10:24 am Forthright said:

Perpetual Trust should be taking a serious look at their ethical standards and asking how the related party lending put any of their investing client interests first. Heading off down the judicial review road, in an attempt to bring shame on the FMA investigative process, does nothing to change most peoples opinion that the actions of Perpetual was not those of a good corporate citizen behaving in a professional manner.

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